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  • Writer's pictureCook Tillman

Understanding Trusts: A Comprehensive Guide For Financial Planners

Updated: Mar 25

Financial planning involves careful consideration of your client's finances, staying in conversation with them as their needs and goals for their future and beyond change. Those needs and goals could be best reached by estate planning with a trust, but this tool is sometimes overlooked. That is why our team at Cook Tillman has created this guide to help financial planners understand trusts. 

Can you explain the different types of trusts and their benefits for individuals and families? How can financial planners guide clients in choosing the right trust structure for their specific needs?

There are two broad categories of trusts: revocable trusts, which, as the name suggests, can be altered quickly, and irrevocable trusts, which are less flexible than their revocable counterparts.  Revocable trusts are used most frequently as a will substitute. We like to think of a trust as a bucket into which clients place assets throughout their lifetime. The client holds onto the “bucket” as trustee and, at death or incapacity, simply passes it to the next trustee named in the trust agreement. Revocable trusts can do the same distribution work as a will but avoid the probate process at death. Irrevocable trusts are typically used to solve niche problems dealing with estate tax or asset protection. Revocable trusts are the most common trust type utilized in estate planning today. 

In what ways can trusts be utilized as effective estate planning tools? Are there specific scenarios or client profiles where trusts are particularly advantageous, and how can financial planners navigate these situations?

There are specific instances where trusts can be helpful, one being if a client owns real estate in multiple states. For example, if a Tennesean passes away at home but has a farm in Kentucky or a beach house in Florida, and their estate planning was done through a will, their beneficiaries will have to open probate in the state in which they lived, because real estate is governed by the county in which it is located. This is called ancillary or “double” probate, which increases administration costs and the resolution time. However, having property in a trust avoids court involvement and cancels out this step. 

Trusts can also be a preferred alternative to a will if privacy is a concern. When someone with a will passes away, the will gets filed with the court and becomes a public record. In some counties, you have to disclose the value of the estate when you do this. Unfortunately, publicly showing the value of the estate can cause security issues. If the family doesn’t want financial affairs to end up in the public eye, or if they are concerned about someone contesting the way the estate is structured, a trust allows the distribution of assets to be kept closer to the vest. 

Cook Tillman Law emphasizes a client-centric approach. How do you ensure that trust planning aligns with the unique financial goals and circumstances of each client? Can you provide examples of customized trust solutions you've implemented for clients in the past?

When estate planning, a client can choose to distribute property to their beneficiaries in one of two ways. They can choose to distribute it outright, and the beneficiaries essentially get a check, or the client can leave the inheritance to the beneficiary in trust. Usually, when the client chooses a trust, it is for asset protection. Distribution schemes can be applied to protect the beneficiary from the beneficiary themselves, who may be unable to manage their money, either because they are minors or irresponsible with money. Trusts can also protect a child’s inheritance from claims of the child’s creditors, including marital claims in the event of divorce. Trusts can also prevent unintended disinheritance if the surviving spouse remarries; the children from the original marriage will remain in line for the trust rather than the children of the second spouse. If assets are left in the trust for the beneficiary’s lifetime, the trust can also guard against future death taxes upon the beneficiary's death. Overall, trusts can be tailored depending on the makeup of a family and their needs. 

Given the evolving legal landscape, how does Cook Tillman Law stay on top of changes in trust laws and regulations? How can financial planners adapt to these changes and ensure their clients' trust structures remain compliant and effective over time?

Because we are a boutique estate planning firm, our focus stays pretty sharp. We read tax journals and spend time on continuing education to ensure we’re ahead of the curve regarding trust laws and legislative updates. We are happy to be specialists in our field, aiding financial advisors so that they can spot issues and make recommendations to their clients during estate planning. We encourage financial planners to reach out if they have questions and sign up for seminars with us, which are approved by the Certified Financial Planners Board (CFP) as continuing education courses for which financial planners can receive credit. 

What are some common misconceptions or concerns that clients may have about trusts? How can financial planners address these concerns and educate clients to make informed decisions about incorporating trusts into their financial plans?

The most common misconception with trusts is that many clients think they don’t have enough money to warrant a trust. In reality, a trust is another accessible estate planning tool that can accomplish various goals, such as avoiding probate, improving privacy and security for beneficiaries, or reducing tax liability. Financial planners should convey the benefits of trusts to their clients, or better yet, introduce them to a trusted estate planning attorney who can guide them through the pros and cons of trust planning. 

At Cook Tillman, we believe that information can help financial advisors and their clients realize the estate plan that makes sense for them and their families. We can be contacted via our website or by phone at (615)-370 2444. We look forward to hearing from you and answering any trust-related questions you may have.


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